Brookfield Property Partners INVESTOR DAY SEPTEMBER 26, 2018 - - PowerPoint PPT Presentation
Brookfield Property Partners INVESTOR DAY SEPTEMBER 26, 2018 Agenda Overview & BPYs 5 -Year Evolution 3 Brian Kingston, Senior Managing Partner & CEO GGP & the U.S. Retail Opportunity 22 Brian Kingston, Senior Managing Partner
INVESTOR DAY SEPTEMBER 26, 2018
Overview & BPY’s 5-Year Evolution
Brian Kingston, Senior Managing Partner & CEO
3 GGP & the U.S. Retail Opportunity
Brian Kingston, Senior Managing Partner & CEO
22 Financial Update
Bryan Davis, Managing Partner & CFO
45 Brookfield’s Multifamily Business
Ric Clark, Senior Managing Partner & Chairman
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$30B
$12B
$3B
$6B
$40B
Total Assets Q2 2013
Total Assets TODAY
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41% 42% 17% Office Retail LP Invesments 51% 44% 5% Office Retail LP Investments
Housing
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First Canadian Place Toronto Canary Wharf London Brookfield Place New York Potsdamer Platz Berlin Fashion Show Las Vegas
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UK & EUROPE
BRAZIL
ASIA & AUSTRALIA
CANADA
UNITED STATES
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London Wall Place London The Eugene New York Principal Place London 5 Manhattan West New York One Blue Slip Brooklyn
PREMIER OFFICE SPACE
APARTMENT UNITS
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1 Bank Street London 1 Manhattan West New York Camarillo Los Angeles 655 New York Ave Washington DC 100 Bishopsgate London ICD Brookfield Place Dubai
PREMIER OFFICE SPACE
APARTMENT UNITS
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companies in North America and Europe
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COMPLETED DEVELOPMENT
PROJECTED GROSS IRR
PROJECTED GROSS MOC
AREA LEASED
RENT INCREASED
CHANGE IN OPERATING OCCUPANCY 2013-2017
business to over 200 assets totaling ~16M SF
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GROSS SALE PRICE*
NET PROCEEDS TO BPY**
GROSS IRR
GROSS MOC
VALUE INCREASED PSF
*Partial sale of business **Includes proceeds from portfolio refinancing following transaction
transacted at an average 4% premium over our carrying IFRS values
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4,000 6,000 8,000 10,000 12,000 14,000 2013 2014 2015 2016 2017 ($’M @100%) Gross Sales Price IFRS Value
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GGP Acquisition Closes
Fund Inception Total Equity BPY Stake Projected Gross IRR Projected Gross MOC RE Opportunity Fund I 2006 11.0% 1.9x RE Opportunity Fund II 2007 20.0% 2.1x RE Turnaround Fund 2009 38.6% 2.3x Strategic Real Estate Partners I 2012 $4.5B 30% 25.0% 2.7x Strategic Real Estate Partners II 2015 $9.0B 25% 19.0% 2.2x Total 26.0% 2.2x
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POLLING QUESTION #1
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* Last 12 Months at June 30, 2018
Grace Building New York Amex House Sydney First Canadian Place Toronto Canary Wharf London Brookfield Place New York Eichhornstraße 3 Berlin FL3500 São Paulo
PROPORTIONATE OFFICE SF
OCCUPANCY
PROPORTIONATE NOI*
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GGP Acquisition Closes
The Shops at LaCantera San Antonio Fashion Show Las Vegas Oakbrook Illinois Stonebriar Centre Frisco
* Last 12 Months at June 30, 2018 (proportionate NOI post closing of GGP, adjusted for asset sales at closing)
PREMIER RETAIL SF
NOI-WEIGHTED TOTAL OCCUPANCY
PROPORTIONATE NOI*
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The Diplomat Resort & Spa Florida Wynyard Place Sydney Center Parcs U.K. Conrad Hotel Seoul
INTERESTS
INVESTED CAPITAL IN BAM PRIVATE FUNDS
PROPORTIONATE NOI*
* Last 12 Months at June 30, 2018
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POLLING QUESTION #2
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Shareholder approval July 26, 2018 Acquisition completed August 28, 2018
Offer price $23.50/share
Issued 160M of BPR shares & 110M of BPY units BPY’s public float increased by ~$6B
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OTHERS
OWNED BY GGP
1.2B SF (4 SF Per Person)
U.K. Australia Canada U.S.
Retail GLA (SF Per Person)
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2015 2016 2017 2018
*Source: FTSE NAREIT
2015 2016 2017 2018 Aug 2018 March 2018
July 2016
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Oakbrook Center Oakbrook, Illinois Ala Moana Honolulu, Hawaii Village of Merrick Park Coral Gables, Florida
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Mall Productivity Land Value
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Mall Productivity Land Value
EXPAND
Baybrook Mall (TX)
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Acquired Land for Lifestyle Center Expanded Power Center Added Outdoor F&B and Entertainment Before After
DENSIFY
Ala Moana Center (HI)
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Mall Productivity Land Value
EXPAND
Baybrook Mall (TX)
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Replaced Anchor Added Residential Density Placemaking Before After
REDEVELOP
NewPark Mall (CA)
DENSIFY
Ala Moana Center (HI)
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Mall Productivity Land Value
EXPAND
Baybrook Mall (TX)
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Before After Replaced Anchor Redeveloped Vacant Box Developed Land to Highest & Best Use
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TOTAL COST
YIELD ON COST
ESTIMATED COST
YIELD ON COST
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POLLING QUESTION #3
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* U.S. Census Bureau
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Earnings and distribution growth for five consecutive years since launch Annual CFFO growth of 9% Annual distribution growth of 6% Reduced payout ratio from 90%
2014 2015 2016 2017 $1.06 $1.12 $1.00 $1.18 $1.11 $1.18 $1.36 $1.44 $1.26 $1.50+
9%
CAGR
2018
6%
CAGR
CFFO Distribution (per unit)
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2014 2015 2016 2017 $0.14 $0.37 $0.08 $0.66
We have earned realized gains from our LP investments in private funds In the early years, these gains were from the sale of individual assets or smaller portfolios As these funds mature, and investment- level business plans are executed, the pace and size of realizations will increase
Realized Gains on LP Investments (per unit)
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Achieve annual CFFO growth for the next 5 years with target of 7%-9% Realize significant earnings from our LP investments including, on average, $500 million in annual realized gains Earnings provide ample coverage for distributions Earnings growth will support distribution growth in line with target of 5%-8% annually
2018 2019 2020 2021 $2.15+ 2022 $2.65+ CFFO Realized Gains Distributions $1.70+ $1.26 $1.50+ $2.00+ (per unit)
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Annual CFFO growth between 2017 and 2022 continues to be driven by:
$1.18
In US$ millions
$0 $100 $200 $300 $400 $500 $600 2017 2018 2019 2020 2021 2022 Office Retail Urban multifamily Condo sales
Cumulative Development NOI
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Size of Fund BPY Share Called from LPs Net IRR Net MOC
BSREP I
1) Including co-invest
In US$ millions
$0 $1,000 $2,000 $3,000 $4,000 $0 $1,000 $2,000 $3,000 $4,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cumulative capital Cumulative FFO Cumulative gains
Profit1
$1.9B
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Size of Fund BPY Share Called from LPs Net IRR Net MOC
BSREP I
BSREP II
In US$ millions
1) Including co-invest $0 $1,000 $2,000 $3,000 $4,000 $0 $1,000 $2,000 $3,000 $4,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Cumulative capital Cumulative FFO Cumulative gains
Profit1
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Until the end of last year, we were investing a significant portion of our available liquidity into LP investments in funds
In US$ millions
2012-2017 2018-2022 Net capital (invested) returned $ (2,700) $ 2,700 Profit 1,000. 3,100 Net cash (outflow) inflow $ (1,700) $ 5,800 Available to:
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Even as we invest capital into each new fund, this investing strategy will continue to produce significant cash flows:
In US$ millions
2012-2017 2018-2022 2023-2027 2028-2032 BSREP I & II $ (2,700) $ 2,700. Profit 1,000. 3,100. Future Opportunity Funds (4,500) 1,000 (400) Profit 900. 4,100 4,200. Net cash (outflow) inflow $ (1,700) $ 2,200 $ 5,100 $ 3,800.
Liquidity
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Target payout ratio leaves sufficient retained cash to protect distribution levels, sustain properties and fund future growth:
In US$ millions
2022 Forecasted CFFO $ 2,300 Annual realized gains from LP investments 600 Annual earnings $ 2,900 Distributions at target payout (1,800) Available to maintain properties and fund growth $ 1,100
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Our approach is to put an appropriate amount of leverage on each asset to provide the best risk-adjusted return on your equity Raise debt in local currency with primarily fixed interest rates Use of minimal amounts of “consolidated” leverage Focus on non-recourse, asset-level debt Maintain a well-laddered debt maturity profile Focus on maintaining our investment-grade credit rating for the long term
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Long-term goal is to maintain a proportionate debt-to-capital ratio of 50% and debt-to- EBITDA of <11x
In US$ millions
Current1 Pro Forma Net debt $ 36,000 $ 43,000 Capitalization 61,000 74,000 EBITDA 2,600 3,400 Debt to capital 59% 58% Debt to EBITDA 13.8X 12.6X
1) Q2’18 EBITDA annualized
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Focused on making progress to achieve target credit metrics
In US$ millions
Pro Forma Target Net debt $ 43,000 $ 40,000 Capitalization 74,000 80,000 EBITDA 3,400 3,800 Debt-to-capital 58% 50% Debt-to-EBITDA 12.6X 10.5X
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$ 20
Narrowing Discount1,2,3 Today
$ 55 $ 48 $ 35
Current Discount1,2
$ 20 $ 20 $ 6 $ 6
2022
$ 22 $ 9
1) Using forecasted 2022 CFFO 2) Distributions assumed at 80% of forecasted 2022 CFFO 3) Using consensus NAV implied multiple
An investment today has the potential to offer a very attractive return to shareholders Yield backed by cash flow from a portfolio of high-quality assets Entry point at discount to average analyst NAV of ~$29 per unit Potential for significant appreciation
15%
CAGR
25%
CAGR Investment Current Yield Appreciation
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1) Source: U.N.
Urban Population
Worldwide Urban Population U.S. Urban Population
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1950
2014
2050
1950
2014
2050
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34.0% 35.0% 36.0% 37.0% 38.0% 39.0% 40.0% 41.0% 42.0% 43.0% 44.0% 60.0% 61.0% 62.0% 63.0% 64.0% 65.0% 66.0% 67.0% 68.0% 69.0% 70.0%
U.S. All Age Groups- Homeownership Rate (left axis) Under 35 years - Homeownership Rate (right axis)
64.0%
Q1’18
35.6%
Q1’18
43.3%
Q1’05
69.1%
Q1’05
> 35 years All age groups
1) Unless otherwise noted, source: U.S. Census Bureau (1Q 2018) 2) Source: Wall Street Journal (February 16, 2018) 3) Source: Wall Street Journal (February 27, 2018)
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1) Source: St. Louis Federal Reserve GEOFRED
Prices Decreased 25% Increase 50% Increase 100% Increase More Than 100% Increase No Data Available
63 85.0% 85.5% 86.0% 86.5% 87.0% 87.5% 88.0% 88.5% 89.0% 89.5% 90.0% 90.5% 91.0% 91.5% 92.0% 92.5% 93.0% 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 96.5%
Occupancy Occupancy Forecast
1) Source for all information on this slide is Axiometrics (1Q 2018). 2) Projections reflected herein have been prepared based on various estimations and assumptions made by a third party, including estimations and assumptions about events that have not
experts may disagree with the estimations and assumptions used in preparing the projections. No assurance, representation or warranty is made by any person that any of the projections are accurate or will be achieved and you should not place undue reliance on the projections. Please refer to the Notice to Recipients for additional information regarding third party sources.
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Supply1
as of 1Q 2018
Demand
as of 1Q 2018
U.S. / Global Markets
1) Source: U.S. Census Bureau (1Q 2018) 2) Source: Axiometrics (1Q 2018) 3) Source: U.S. Federal Reserve (1Q 2018) 4) Source: U.S. Bureau of Labor Statistics (1Q 2018) 5) Source: CBRE Global Investor Survey (1Q 2018)
(near 14-year high)2
(4-quarter average) (52-year low)1
past seven years2
from 2005 through 20171
above 25-year average1
Baby Boomers, Gen Z, and Immigrants1
1.2M 12-month average 93% of 25-year average of 1.3M 886,000 average post-recession (2008-2017); 67% of 25-year average
863,000 12-month average 612,000 average post-recession (2008-2017); 60% of 25-year average
361,000 12-month average Renter demand absorbing new supply: occupancy remains near 95%
22,000 12-month average 60% below 25-year average
40 years old
since last recession4
interest rates3
real estate5
U.S., with assets located in diverse, urban and suburban locations in over 20 states
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Units1
MANHATTAN MULTIFAMILY Manhattan, NY
Properties1
Equity2
Gross Asset Value2
GREENPOINT LANDING Brooklyn, NY L SEVEN APARTMENTS San Francisco, CA NIIDO ORLANDO Kissimmee, FL
1) Units and properties on a 100% basis. 2) Equity and GAV as of Q2’18 on an IFRS basis at BPY’s share
3 properties 22 properties 1 property 2 properties 10 properties 4 properties 3 properties 2 properties 5 properties 5 properties 7 properties 5 properties 2 properties 10 properties 15 properties 3 properties 6 properties 7 properties 5 properties 1000 2000 3000 4000 5000 6000 7000 AZ CA CO CT FL GA IN MA MD MI NC NJ NV NY OH OR TX VA WA Units
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2014
Acquired Manhattan Multifamily Portfolio $330 million equity invested to date Acquired Ginkgo Multifamily in 2012 and Palmetto Multifamily in 2013 Total equity invested
(realized) U.S. Multifamily Value Add Fund II $849 million equity invested to date
2016
U.S. Multifamily Value Add Fund III $127 million equity invested to date Acquired land for Greenpoint Landing, Studio Plaza and Andorra developments
2017
U.S. Multifamily Value Add Fund I $315 million equity invested to date (realized)
2011 2010
Acquired Fairfield (Investment Company and Service Company) Acquisition of The Alexander and 8500 Sunset Boulevard $122 million equity invested to date
2013 2012
Acquired Associated Estates Realty $848 million equity invested to date NYC Tristate Multifamily Developments $67 million equity invested to date
2015 2018
Opening of The Eugene at Manhattan West, a 844-unit luxury building Opening of One Blue Slip, the first of four multifamily towers at Greenpoint Landing Select investments shown above.
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downtown LA financial district
development across 64 stories
schematic design and working through completion of entitlements, with target scenario of early 2019 construction
development located on the waterfront in Greenpoint, Brooklyn
views of Manhattan
UNDER CONSTRUCTION PLANNING STAGES COMPLETED
The Eugene
$791 million1
MANHATTAN, NY
West side of Manhattan
completed in 2017
as part of Brookfield’s “Manhattan West”
market rate and 169 affordable
96% leased
755 Figueroa
$515 million1
LOS ANGELES, CA
Greenpoint Landing
$1.6 billion1
BROOKLYN, NY
One Blue Slip
$287 million1
BROOKLYN, NY
Mott Haven
$950 million1
BRONX, NY
Halley Rise
$1.4 billion1
RESTON, VA
4.3 acre development, located on the Harlem River shoreline in the South Bronx
largest private developments in the history of the Bronx
building completed as part of the Greenpoint Landing Master Plan
units, Brookfield completed in 2018
September, 2018, lease up is
projected rents at below market concessions
Fairfax County
blocks totaling 3.6 million SF,
apts., 450K SF retail, and 5+ acres of parks
schematic design, and received county board approval July 2018
1) Reflects total cost
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Map source: Economic Innovation Group
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Typical Building Services & Amenities Enhanced Offerings at Luxury/High-Rise Buildings
Smart Access Technology
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Personal Concierge
Ride Share Platform
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GGP Acquisition Closes
Multifamily Rental Location Units Completion ($M) Cost1 Yield The Eugene Manhattan 844 2017 414 5% One Blue Slip Greenpoint 359 2018 273 6% Village Gateway Camarillo 450 2018 127 7% Studio Plaza Silver Spring 399 2019 106 7% Water St. / George St. London 352 2019 200 5% Greenpoint Bldg. F Greenpoint 421 2020 358 6% Newfoundland London 636 2020 329 4% TOTAL 3,461
1) Represents BPY’s proportionate share of investment.
Multifamily Condo Location Units Completion ($M) Cost1 Yield Principal Place London 301 2019 251 17% Southbank Place London 777 2019 296 20% 10 Park Drive London 345 2019 156 31% One Park Drive London 468 2021 292 30% TOTAL 1,891 Planned Units Projects in Planning Phase 6,400 11,752 TOTAL COMPLETED, ACTIVE AND PLANNED
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All amounts are in U.S. dollars unless
financial data in this document is presented as of June 30, 2018. This presentation contains “forward-looking information” within the meaning of applicable securities laws and regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects,
priorities, targets, goals,
for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans”, “believes,” “estimates”, “seeks,” “intends,” “targets,” “projects,” “forecasts,” “likely,” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could”. Forward-looking statements include, without limitation, statements about target earnings and distribution growth, the growth potential of our existing and new investments, return
invested capital, gains
releasing and occupancy, targeted same-store growth and returns on redevelopment and development projects, the ability to recycle capital, the availability of suitable investment opportunities, and the availability of financing and our financing strategy. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward- looking statements and information because they involve known and unknown risks, uncertainties and
factors, many of which are beyond our control, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: risks incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the ability to enter into new leases or renew leases on favorable terms; business competition; dependence on tenants’ financial condition; the use of debt to finance our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rates; uncertainties
real estate development
redevelopment; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; risks relating to our insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax laws and other tax related risks; dependence on management personnel; illiquidity of investments; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom;
such as earthquakes and hurricanes; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying
forward-looking statements
information, investors and
should carefully consider the foregoing factors and other uncertainties and potential
statements or information, whether written or oral, that may be as a result of new information, future events or
In considering investment performance information contained herein, prospective investors should bear in mind that past performance is not necessarily indicative
comparable results will be achieved, that an investment will be similar to the historic investments presented herein (because of economic conditions, the availability of investment opportunities
that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved. This presentation includes estimates regarding market and industry data that is prepared based
its management's knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information and industry reports and publications. While we believe such information is reliable, we cannot guarantee the accuracy
completeness
this information and we have not independently verified any third-party information. This presentation makes reference to net operating income (“NOI”), funds from operations (“FFO”), and Company funds from operations (“CFFO”). NOI, FFO and CFFO do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures presented by other companies. The Partnership uses NOI, FFO and CFFO to assess its operating results. These measures should not be used as alternatives to Net Income and other operating measures determined in accordance with IFRS but rather to provide supplemental insights into performance. Further, these measures do not represent liquidity measures
the funds available for distribution to unitholders either in aggregate or on a per unit basis, where presented. For further reference, specific definitions of NOI, FFO, and CFFO are available in the Partnership’s press releases announcing its financial results each quarter.
INVESTOR DAY SEPTEMBER 26, 2018